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Critical rulings show risks of going paperless, lawyer says

A Hamilton, Ont., personal injury lawyer says his firm is the “poster child” for the risks of going paperless after ending up on the receiving end of a series of critical rulings from local judges.

Last month, in the case of Hernandez v. Lariviere, Ontario Superior Court Justice Thomas Lofchik refused to reinstate the claim of a Ferro & Co. client after the registrar issued an order dismissing the action for delay. Lofchik wrote that the firm’s principal, Lou Ferro, had displayed inaction that could “fairly be interpreted as both intentional and deliberate.”

Citing three previous decisions on motions to set aside dismissals for delay involving Ferro’s firm, Lofchik said in his Dec. 15 decision that it was “far past time for Mr. Ferro to take responsibility for his actions and for the court to respond to a clear pattern of inattentiveness and neglect.”

In a statement to Law Times, Ferro said the Hernandez file was “in its prime” while the firm was in the process of transferring all of its paper files to an electronic filing system.

“The profession should be warned that the transfer from paper to electronic format comes with its risks,” he wrote.

“All those risks were calculated by myself when entering into the conversion, but I didn’t expect such an incredibly complex and complete revision of the way in which we practised law.”

At the height of the transfer process, Ferro said he was getting up to 100 status notices per month warning that files not on the trial list would be subject to dismissal for delay within 90 days.

While some files fell through the cracks, Ferro said judges, in positions removed from the day-to-day realities of practice, were unsympathetic to his plight.

“The bench, unfortunately, did not appreciate the significance of the transfer of 20 million pieces of paper from paper files to electronic,” said Ferro, noting his firm’s electronic filing system is now “fully employed and working.”

The Hernandez relates to a motor vehicle accident in 2005 when a vehicle making a left turn hit the plaintiff’s car. While the statement of claim dates back to May 2007, it took nearly three years to complete the plaintiff’s examination for discovery after four previous failed attempts.

According to Lofchik’s decision, the plaintiff then failed to comply with undertakings given at the examination, which resulted in a motion to compel their fulfilment and the cancellation of an independent medical assessment.

The registrar issued the order dismissing the action in December 2011. The judge noted that while Ferro’s office became aware of the dismissal in January 2012, it took until November 2012 for the firm to serve a motion record to set it aside.

Lofchik’s ruling also referred to three previous decisions on similar motions involving Ferro’s law firm.

In the 2011 case of Soldatova v. Bruno, Ferro’s client was successful in setting aside the dismissal, but Justice John Cavarzan warned the lawyer not to expect any further indulgence in the future considering the “administrative chaos” reflected in the handling of the file.

Later that year, Justice James Ramsay upheld a dismissal order in Hernandez v. Western Assurance Co. He blamed missed deadlines on the law firm’s “inadequate file management practise” and reliance on “staff who are inadequately supervised.”

In 2012, Justice Grant Campbell ruled the same way in Thomas v. McLelland, finding “nothing has changed” in Ferro’s office since Ramsay’s judgment and criticizing the lawyer for his “chronic casual and cavalier approach to his duties.”

“Within the context of this case and after various admonitions from my colleagues on prior cases, Mr. Ferro’s inaction can fairly be interpreted as both intentional and deliberate,” wrote Lofchik after reviewing the previous cases.

Despite finding there would be no prejudice to the defendant if he set aside the dismissal, the judge decided against reinstating the plaintiff’s claim.

“In the circumstances of this case the finality principle must trump the Plaintiff’s request for an indulgence and restricting the Plaintiff’s claim to an action against his lawyer is a just result on a contextual basis that balances the interest of the parties and takes into account the public’s interest in the timely resolution of disputes,” wrote Lofchik.

The judgment capped a poor couple of months in front of judges for Ferro’s firm: 12 days before Lofchik’s judgment, Ramsay dealt another blow to a Ferro client when he proceeded to hear and grant an insurer’s summary judgment motion despite the absence of anyone from the law firm at the hearing. In Steele v. Intact Insurance Co., a statutory accident-benefits claim, counsel for both sides had agreed to reschedule the motion from a June date to the first week of December.

“It was confirmed and then called for hearing today. The plaintiff’s lawyers were notified by telephone and fax. The plaintiff’s lawyers have not appeared, without explanation. There is a note from the trial coordinator on a yellow sticky, saying ‘Mr. Ferro’s office wants adj.’ That is the sum total of communication from the plaintiff’s law firm, which has several lawyers. The defendant’s counsel asked to proceed. I saw no reasonable basis for declining to do so given the number of times the case has been up, the lack of any

explanation and the fact that in all this time the plaintiff has filed no material,” Ramsay wrote in his Dec. 3 endorsement before going on to grant summary judgment.

A month earlier, on Nov. 17, Justice Cory Gilmore also had critical words for Ferro in a solicitor’s breach of undertaking action by Justin Hrycko, the former common law spouse of a Ferro client, Olga Miller.

Hrycko had lent Miller $40,000 while her motor vehicle accident claim was ongoing on the condition she pay him back out of the proceeds of her settlement. Ferro’s firm provided him with a written undertaking to that effect, but when it received four separate settlement payments totalling about $650,000 for its work on behalf of Miller, it disbursed none of it to Hrycko.

“At his examination for discovery, Mr. Ferro was asked why he did not fulfill his undertakings. His response on discovery was, ‘Well, I don’t believe it’s a personal undertaking because that infers that I consciously made a promise to do something and failed to do it,’” wrote Gilmore in his decision.

In the meantime, according to Gilmore’s judgment, Miller continued to borrow money from Hrycko without telling Ferro about the increased amount of the loan and informing Hrycko about the existing settlement funds.

After Miller died and left a bankrupt estate, Hrycko launched a claim for $100,000 against Ferro alleging that if he had honoured his undertakings, he would have known about the settlements and would never have continued loaning her money.

Ferro argued he should only be liable for the $40,000 mentioned in the written undertaking, but Gilmore ruled he should be responsible for the additional loans in light of “such amounts being a reasonably foreseeable consequence of the breach of his duty relating to the undertakings.”

Gilmore ordered the law firm to pay $100,000 plus prejudgment interest to Hrycko and indicated his view that costs on a full indemnity scale were in order.

“With respect to costs, there appears to be no satisfactory explanation as to why Mr. Ferro did not honour his undertakings as required by Rule 6 of the Rules of Professional Conduct. His explanation during his examination as to why he failed to honour his undertakings was somewhat shocking,” wrote Gilmore.

In his statement to Law Times, Ferro said Gilmore’s decision was under appeal and the law firm had always set aside “sufficient funds to pay on the directions we had.”